June 3rd 2024 Stock Market analysis

Market Soars on Exit Poll Results; Sensex and Nifty Close at Record Highs

Indian equity markets surged over 3 percent on June 3 as Dalal Street cheered exit polls predicting a significant win for the BJP-led NDA for the third consecutive term. Factors such as estimate-beating GDP data, early monsoons, higher GST collections, and positive global markets further fueled the rally.

At closing, the Sensex was up 2,507.47 points or 3.39 percent, reaching 76,468.78, while the Nifty gained 733.20 points or 3.25 percent, ending at 23,263.90.

A gap-up opening propelled the market to record highs, with the BSE Sensex and Nifty50 hitting intraday peaks of 76,738.89 and 23,338.70, respectively, amid sector-wide buying.

The Nifty Bank index also reached a fresh record high of 51,133.20 during intraday trading. The biggest gainers on the Nifty included Adani Ports, NTPC, SBI, Power Grid Corp, and ONGC, while the top losers were Infosys, LTIMindtree, HCL Technologies, Nestle, and Dr. Reddy's Laboratories.

All sectoral indices closed in the green, with capital goods, PSU Bank, oil & gas, power, and realty sectors rising between 5-8 percent.

The BSE midcap index rose 3.5 percent, while the smallcap index added 2 percent.

Technical Outlook on 4th June

Nifty may expect a high volatility trade with resistance of 23800 and the support has 22329 levels.

Banknifty is also a high volatility trade with resistance of 51800 and the support has 48608 levels.

Derivative Outlook on 4th June

PCR Analysis: Nifty PCR-OI has increased with nifty has positive close which shows PUT WRITING.

Open Interest Analysis: Nifty future June contract OI has decreased with positive close which shows Short Covering.

Cost of Carry Analysis: Nifty June month contract has ended in high compare with July contract and high range compare with previous session which indicates a high volatility trade.

India VIX Analysis: India VIX has closed at 20.94 vs 24.60 (DoD) basis which shows decrease in volatility.

‍All Sectors Except FMCG, Healthcare, IT, and Media Reach Record Highs

On June 3, all sectoral indices, except Nifty FMCG, Healthcare, IT, and Media, were trading above their record highs following a significant rally in Indian markets driven by exit polls predicting a landslide victory for the Bharatiya Janata Party (BJP).

The benchmark Nifty Index opened over 3% higher on June 1 after exit polls forecast Prime Minister Modi’s BJP-led NDA government would secure over 350 Lok Sabha seats, surpassing many bullish market projections from brokerages.

Nifty MidCap and SmallCap 100 indices rose over 2.5%, with Nifty PSU Bank leading sectoral gains at over 8%. Nifty Oil & Gas and Realty followed, rising 7% and 6% respectively. Nifty Bank climbed 3.7%, while Nifty Auto, Private Bank, and Metal each gained nearly 3%. Nifty IT and Healthcare saw marginal gains.

Analysts expect a positive impact from policy continuity with the increased number of NDA government seats. Historically, NDA wins have exceeded exit poll predictions, potentially leading to further market upturns. Sectors such as PSUs, defense, power, manufacturing, and renewable energy could benefit from government focus. Investors are advised to stay invested cautiously due to elevated valuations. Analysts foresee aggressive reforms with a potential third term for Prime Minister Modi's NDA government, boosting investor optimism. Despite premium market valuations, earnings lag in government-linked sectors like defense and railways. Profit-booking may follow the initial election euphoria. The next five years may prioritize rail freight, urban infrastructure, and GST reforms, they added. Elara Capital favors Mid & Small Caps post-elections but suggests a selective approach due to high valuations. Reduced borrowing and RBI dividend payments may benefit Real Estate, Banks, and Autos. Private banks are preferred over public ones amid expected private capex revival.

Nifty FMCG was 5% below its all-time peak, Nifty IT trailed by about 20% from its high, and Nifty Healthcare was just 2% shy of its record.

Jefferies is optimistic about capex stocks, favoring real estate, industrials, and power for the long term. Preferred stocks include HDFC Bank, IndusInd Bank, Kotak Mahindra Bank, Eicher Motors, TVS Motor, ACC, and Shree Cement.

Motilal Oswal holds an overweight position on financials, consumption, industrials, and real estate sectors, recommending stocks like ICICI Bank, SBI, L&T, and others. JPMorgan sets a Nifty target at 25,000 if BJP retains power, suggesting focus on defense, waterways, and manufacturing themes.